They say 20% of new businesses fail within the first year. By year five, half of new businesses fail. That’s what data from The Bureau of Labor Statistics tells us, and for new entrepreneurs that stat can be pretty intimidating. After all, more than five million new businesses were created in 2022 (a record year!) according to the US Census Bureau — does this mean 2.5 million businesses are destined to fail within the next few years?
Not necessarily.
Businesses fail for many reasons, from poor planning to financial challenges. Some businesses expand too fast, scaling up before they’re ready. Some get too complacent, allowing themselves to grow stale in their market. Sometimes, businesses fail for reasons that are totally out of their control — like getting hit with an economy-disrupting global pandemic, for instance.
Businesses fail for many reasons — but data tells us that within the first five years just as many businesses succeed. Rather than focusing on why businesses fail, let’s take a look at what established businesses, those that have survived for 6+ years, do differently — and what you can do to increase the odds of your own business’s survival.
Here’s what the most recent QuickBooks-commissioned survey data tells us small business owners can do to ensure the success of their new business through the first five years and beyond.
You started a business to follow your dreams and be your own boss, not because you’re a financial expert or interested in complicated accounting formulas. You don’t have to be a certified accountant to own and operate a successful business, but you do need to have a basic understanding of your business finances.
Successful business owners understand what impacts their bottom line. They know how much revenue they need to make to pull a profit, which parts of their business are the most profitable, and what their expenses are.
Longevity relies on knowledge — and lasting businesses are successful in part because they have an intimate knowledge of their business needs.
Cash flow is a constant struggle for small businesses — even established businesses. Over 60% of new business owners say cash flow is a problem, while 44% of established businesses admit cash flow is an ongoing challenge.
Understanding the ebbs and flows of cash in and out of your business can help you avoid dry spells and keep your money moving in the right direction. This means understanding how to measure your business's cash flow, build cash flow projections, and manage your business expenses.
The goal of every new business is rapid growth, right? Not so fast. Growing a new business is incredibly rewarding, but growing too quickly can result in some serious growing pains. Scaling up before you’re ready could be a recipe for disaster. Successful businesses with longevity on their side say steady growth and stability are top priorities.
Slow and steady wins the race. Make sure your business is prospering at its current size before taking the next step.
They say emotion drives 80% of financial decision-making — logic steers the remaining 20%. With the rising cost of inflation, banking crisis headlines, and economic uncertainty at the forefront of small business owners’ minds, it’s easy to get emotional and make some not-so-logical decisions. But lasting businesses say they’re staying focused and staying the course.
Younger businesses are investing more time and money into new technology and innovations, but established businesses are prioritizing their time, money, and effort for their most essential operations.
You don’t need a huge marketing budget to get the word out about your business. You just need to offer a great product or service and an outstanding customer experience. Easy, right? Okay, easier said than done, but established businesses say word-of-mouth referrals, a low-cost marketing strategy, offer the highest return on investment.
Never underestimate the power of word-of-mouth marketing. Getting back to a strategy that exceeds customer expectations and has them passing your business along to a friend or family member could mean the difference between failure and success.
In this market, an online presence is crucial — there’s no doubt about it. But it’s equally important to connect with your customers where they are (and where they prefer to shop). While newer businesses tend to be more digitally native companies, established businesses understand the value of in-person retail experiences — signaling the value of a diversified sales approach.
Omni-channel and multi-channel sales strategies, which include both an in-person and online approach, offer customers multiple ways to connect with your brand. Plus, multiple sales channels allow your business to pivot quickly if one channel fails (in the off-chance a global pandemic hits, for example, shutting down all in-person activities).
Even if you have formal business or management training (65% of new business owners say they do), there’s one thing you can only earn with time: experience. Only 56% of established business owners say they have formal training, but these business owners say they rarely feel out of depth at work. The difference is years of experience.
You don’t need formal training to succeed in business — but you also shouldn’t expect to know everything from day one, or to do it all without help. If you’re just starting out, established business owners who have been there, done that, can be your greatest source of knowledge and support. All you need to do is ask.
Intuit QuickBooks Small Business Insights 2023
Online survey commissioned by Intuit QuickBooks in December 2022 of 1,500 business owners throughout the US. Average annual business revenue from the previous year was $1,033,965. Half (52%) of respondents are men and nearly half (47%) are women. One in five (22%) respondents are sole proprietors and nearly half (45%) have up to 10 employees. Three in ten (30%) respondents own businesses five years old or younger. Seven in ten (70%) own businesses six years old or older. Percentages have been rounded to the nearest decimal place so values shown in charts and graphics may not add up to 100%. Responses were collected in online surveys using Pollfish audience pools and partner networks with double opt-ins, random device engagement sampling, and post-stratification based on local census data to ensure accurate targeting and results. Respondents received remuneration.
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